17 January 2012
MUSCAT: The global economic growth may slow down to 2.2 per cent in 2012, against 4.3 per cent and 3 per cent in 2010 and 2011, respectively, a leading bank said in a research note yesterday.
Standard Chartered Bank, in its Global Focus Report, said that a significant slowdown in the first half of the year due to the crisis in the West, may slow Global growth to 2.2 per cent for the full year.
The bank's report said the local factors will ultimately determine economic performance in the Middle East and North Africa (Mena) region this year.
Marios Maratheftis, head of Research, Europe, Middle East, Africa and Americas, Standard Chartered said: "The economic and market implications of Europe's debt crisis bring back memories of 2009. However, parts of Mena are in a significantly stronger position now. This is particularly true for the Gulf Cooperation Council (GCC) economies, which we expect to show resilience, with growth decelerating only moderately in 2012. Asset bubbles in the GCC have already burst, and unsustainable credit booms are long over. Base effects have become more favourable."
"We expect oil prices to remain elevated in 2012. This bodes well for the government finances of oil-exporting countries, and it should enable counter-cyclical fiscal responses. Fiscal policy in Saudi Arabia is already on an expansionary trajectory and should continue to drive growth in 2012."
Abu Dhabi and Qatar adopted a more conservative approach to government expenditure in 2011. Their project pipelines are full, though, and while the bank does not anticipate a boom in government spending, any increase will help to pick up the slack in the economy. Stable oil prices provide governments in the region with ample fiscal space.
Commenting on policies, Maratheftis said: "GCC countries have the fiscal space to shift to more expansionary policy. Policy in Saudi Arabia is already expansionary, and this is set to continue in 2012. We also anticipate higher spending in Qatar and, to some extent, Abu Dhabi. In Egypt and Jordan, fiscal headroom is limited and the focus will be on financing the funding gap rather than on growth."
GCC monetary policy
Monetary policy in the GCC will continue to be tied to United States policy, as the region's currency pegs face no pressure for either revaluation or devaluation.
Standard Chartered sees 2012 as a year of a two-speed global economy. The bank, which recently topped a ranking of 354 global firms for the accuracy of its economic forecasts over the past two years, sees a slowing global economy in 2012, with a fragile West and a resilient Asia, Africa, Middle East and Latin America.
The mounting crisis in the advanced economies is expected to cause the euro area (-1.5 per cent) and the UK (-1.3 per cent) to fall back into recession and United States growth (+1.7 per cent) to remain below-trend.
Gerard Lyons, chief economist and group head of Global Research, said: "This points to the continuation of a two-speed world where a fragile West contrasts with a resilient East. It is a divided and disconnected world economy facing major policy dilemmas. Yet, no region is fully decoupled from events elsewhere.
"In the first half of 2012, problems in Europe and the West will weigh on global growth. By the second half, stronger growth across China and other emerging economies should pull up worldwide activity. It will be a recovery made in the East and felt in the West. If ever one needed to illustrate the shift in the balance of power, this is it."
Asian growth seen at 6.5%
In its annual Global Focus report, the bank forecasts that Asia's gross domestic product (GDP) growth will slow to a still-robust 6.5 per cent in 2012 from 7.3 per cent in 2011. China is expected to cool significantly in the first few months of 2012 before rebounding, helped by a major policy boost. As a result, China's growth will decelerate from 9.2 per cent to 8.1 per cent in 2012.
Growth in India, Asia's third-largest economy, is expected to accelerate mildly to 7.4 per cent in the fiscal year starting 1 April, 2012, from 7 per cent in 2011.
There are significant underlying growth drivers across the emerging world, including a rapidly expanding middle class, rising infrastructure investment and growing business ties along the `new trade corridors' linking Asia, Africa, the Middle East and Latin America. These factors are likely to become more pronounced as Europe contracts and US consumers deleverage. Differentiation remains the key issue in the Middle East, where the resource-rich economies are expected to show resilience, with growth decelerating only moderately in 2012.
Asset bubbles in the region have already burst and unsustainable credit booms are long over, providing a stable base for growth. Elevated oil prices bode well for government finances, enabling authorities to adopt counter-cyclical fiscal policies to stimulate growth as the West decelerates.
MUSCAT: The global economic growth may slow down to 2.2 per cent in 2012, against 4.3 per cent and 3 per cent in 2010 and 2011, respectively, a leading bank said in a research note yesterday.
Standard Chartered Bank, in its Global Focus Report, said that a significant slowdown in the first half of the year due to the crisis in the West, may slow Global growth to 2.2 per cent for the full year.
The bank's report said the local factors will ultimately determine economic performance in the Middle East and North Africa (Mena) region this year.
Marios Maratheftis, head of Research, Europe, Middle East, Africa and Americas, Standard Chartered said: "The economic and market implications of Europe's debt crisis bring back memories of 2009. However, parts of Mena are in a significantly stronger position now. This is particularly true for the Gulf Cooperation Council (GCC) economies, which we expect to show resilience, with growth decelerating only moderately in 2012. Asset bubbles in the GCC have already burst, and unsustainable credit booms are long over. Base effects have become more favourable."
"We expect oil prices to remain elevated in 2012. This bodes well for the government finances of oil-exporting countries, and it should enable counter-cyclical fiscal responses. Fiscal policy in Saudi Arabia is already on an expansionary trajectory and should continue to drive growth in 2012."
Abu Dhabi and Qatar adopted a more conservative approach to government expenditure in 2011. Their project pipelines are full, though, and while the bank does not anticipate a boom in government spending, any increase will help to pick up the slack in the economy. Stable oil prices provide governments in the region with ample fiscal space.
Commenting on policies, Maratheftis said: "GCC countries have the fiscal space to shift to more expansionary policy. Policy in Saudi Arabia is already expansionary, and this is set to continue in 2012. We also anticipate higher spending in Qatar and, to some extent, Abu Dhabi. In Egypt and Jordan, fiscal headroom is limited and the focus will be on financing the funding gap rather than on growth."
GCC monetary policy
Monetary policy in the GCC will continue to be tied to United States policy, as the region's currency pegs face no pressure for either revaluation or devaluation.
Standard Chartered sees 2012 as a year of a two-speed global economy. The bank, which recently topped a ranking of 354 global firms for the accuracy of its economic forecasts over the past two years, sees a slowing global economy in 2012, with a fragile West and a resilient Asia, Africa, Middle East and Latin America.
The mounting crisis in the advanced economies is expected to cause the euro area (-1.5 per cent) and the UK (-1.3 per cent) to fall back into recession and United States growth (+1.7 per cent) to remain below-trend.
Gerard Lyons, chief economist and group head of Global Research, said: "This points to the continuation of a two-speed world where a fragile West contrasts with a resilient East. It is a divided and disconnected world economy facing major policy dilemmas. Yet, no region is fully decoupled from events elsewhere.
"In the first half of 2012, problems in Europe and the West will weigh on global growth. By the second half, stronger growth across China and other emerging economies should pull up worldwide activity. It will be a recovery made in the East and felt in the West. If ever one needed to illustrate the shift in the balance of power, this is it."
Asian growth seen at 6.5%
In its annual Global Focus report, the bank forecasts that Asia's gross domestic product (GDP) growth will slow to a still-robust 6.5 per cent in 2012 from 7.3 per cent in 2011. China is expected to cool significantly in the first few months of 2012 before rebounding, helped by a major policy boost. As a result, China's growth will decelerate from 9.2 per cent to 8.1 per cent in 2012.
Growth in India, Asia's third-largest economy, is expected to accelerate mildly to 7.4 per cent in the fiscal year starting 1 April, 2012, from 7 per cent in 2011.
There are significant underlying growth drivers across the emerging world, including a rapidly expanding middle class, rising infrastructure investment and growing business ties along the `new trade corridors' linking Asia, Africa, the Middle East and Latin America. These factors are likely to become more pronounced as Europe contracts and US consumers deleverage. Differentiation remains the key issue in the Middle East, where the resource-rich economies are expected to show resilience, with growth decelerating only moderately in 2012.
Asset bubbles in the region have already burst and unsustainable credit booms are long over, providing a stable base for growth. Elevated oil prices bode well for government finances, enabling authorities to adopt counter-cyclical fiscal policies to stimulate growth as the West decelerates.
© Times of Oman 2012
